NCERT Solutions for Class 12 Economics II Chapter 4 Determination Of Income And Employment

Ans : Marginal propensity to consume is the ratio of change in consumption expenditure to change in total income.
\(M P C=\frac{\Delta C}{\Delta Y}\)
Marginal propensity to save refers to the ratio of change in saving to change in income
\(\mathrm{MPS}=\frac{\Delta S}{\Delta Y}\)
Marginal propensity to consume and marginal propensity to save IS equal to one or MPC = 1- MPS, MPS: 1- MPC 
MPC + MPS: 1
there MPS: Marginal propensity to save 
MPC = Marginal propensity to consume
\(\begin{array}{l}{\Delta \mathrm{sc}=\text { Change In consumption expenditure }} \\ {\Delta \mathrm{Y}=\text { Change in total Income }} \\ {\Delta \mathrm{S}=\text { Change in saving }}\end{array}\) 

Ans : Ex-ante investment is the amount of Investment which firms plan to invest at different level of Income in the economy Where as Ex-post Investment is the amount realised or actual investment in an economy during a year. 

Ans : Parametric shift is a graph due to change in the value of a parameter. 
(i) A positively sloping straight line swings upwards at its slope is decreases. 
(ii) A positively sloping straight line shifts upwards in parallel as its Intercept is increased. 

Ans : It in an economy as people become more thrifty they end up saving less or same as before in aggregate. This theory produced by Keynes "When people start saving money Instead of spending it. In response to growing concerns about a recession. they actually make the recession worse." Rise in MPS means a fall in MPC. When MPC falls. aggregate consumption expenditure In the economy falls It leads to rise Inventory level producers and firms would plan to reduce the production It will reduce the demand for factor services and factor incomes. As a result the total volume of saving generated in the economy would fall or remain unchanged 

Ans : \(\begin{array}{c}{\text { Aggregate demand is given as }} \\ {\text { AD }=\overline{A}+b(y)} \\ {\overline{A}=50 \mathrm{MPC}(\mathrm{b})=1-\mathrm{MPS}=1-0.2=0.8}\end{array}\)
After putting values 
AD = 50+ 08 x 4000= 3250 crores 
Result AD of ₹3250 crores in less then Y (income) of ₹4000 crores. 
Hence, the economy is not at equilibrium.